Viewed from 30,000 feet, broad trends in intermodal chassis supply are easy to see: more chassis pools, fewer ship lines supplying free equipment, more truckers renting chassis by the day.
On the ground, it’s more chaotic. As container ship lines disengage from 50 years as the primary suppliers of chassis to the U.S. market, the transition is proving more complex than many expected. There’s an explosion of new business models for supplying the equipment.
How it will shake out is unclear, but industry leaders say the U.S. isn’t ready to replicate what exists in Europe or Asia, where most truckers own their chassis. “We really have to put to rest once and for all the idea that the United States can evolve into a European or an Asian model anytime soon,” said Steve Rubin, principal at container shipping and intermodal consulting firm InterPro Advisory and a former president of chassis lessor TRAC Intermodal.
Rubin and others also say there’s no chance the U.S. will adopt a single nationwide system for chassis supply. Chassis, they note, are used and managed regionally, not nationally, and that’s not going to change. And they say that until commercial issues can be worked out, the chassis industry will remain in flux.
“This is not something that is going to be settled this year or next year or probably the year after,” Rubin said. “It’s an unbelievably complicated issue with no one-size-fits-all solution.”
For ocean carriers, trucking companies and their shipper customers, that state of flux and varying nature of chassis operations will only complicate an already muddled process in securing, maintaining and paying for a critical element in the last leg of the global supply chain.
Rubin is co-lead author and subject matter expert for a Transportation Research Board-commissioned guide to the patchwork of chassis-supply models springing up in the U.S. market. The detailed report, prepared by transportation and infrastructure consultant CPCS Transcom, is in draft form. The final version will be issued later this year.
“The future evolution of chassis supply in the U.S. will be the result of the interplay of various stakeholder interests, influences and regional differences, within the structural chassis supply context that shaped the U.S. chassis supply landscape,” the TRB study concluded. In a clear sign of the complicated nature of the business, no stakeholder — not the trucking companies that operate the equipment, the truckers, ocean carriers, third parties and lessors that own it, or the shippers that rely on it — has the clout to singlehandedly shape the industry’s new direction, the study said.
Chassis emerged as a top industry issue nearly a decade ago, when ocean carriers began to embrace equipment-sharing pools and talk about extricating themselves from the burden of supplying free chassis as part of their intermodal services.
Further impetus for change came in 2009 when Maersk Line transferred its chassis to Direct ChassisLink, a new affiliate that rented the equipment to truckers by the day. TRAC Intermodal and Flexi-Van Leasing quickly began offering daily rentals in addition to longer leases. Numerous ocean carriers quit providing chassis at selected ports and inland points, leaving truckers to make their own arrangements.
Those steps pointed the industry in the direction of the prevailing model in other major countries, where truckers generally provide their own chassis. In the U.S., ocean carriers traditionally have been the main suppliers, a practice dating to modern container shipping’s origins as a domestic coastwise competitor to trucking.
Although ocean carriers are reducing their role in chassis, they’re still involved heavily, either directly or through equipment-sharing pools. Maersk and CMA CGM are the only major lines that have quit providing chassis in all U.S. locations. Others are eliminating them in phases, usually starting at small terminals and inland depots.
Of the approximately 725,000 chassis in the U.S. fleet, the TRB study estimates 565,000, or 80 percent, are used for international shipments. Leasing companies, principally TRAC, Flexi-Van and DCLI, control two-thirds of those. Ocean carriers supply the rest, except for about 3 percent supplied by motor carriers.
Although ocean carriers’ transition from direct supply has been uneven and sometimes rocky, there’s no turning back, said Mike Wilson, senior vice president at Hamburg Sud North America. “In my estimation, we’re probably in the early phases of this, but we’re on our way,” he said during a panel discussion at The Journal of Commerce’s TPM ocean shipping conference last month.
Most container lines participate in local or regional pools such as those operated by Consolidated Chassis Management. CCM, a subsidiary of the 20-member Ocean Carrier Equipment Management Association, operates six independent regional cooperative pools with 20 to 25 percent of the nationwide fleet. CCM’s pools recently won Federal Maritime Commission approval to admit truckers, shippers and third parties.
Pools have improved average chassis productivity to 40 to 45 loads a year from 30, and reduced per-load costs about 40 percent, Wilson said. “The more productive the chassis, the lower the cost and the lower the carbon footprint,” he said.
In co-op pools, members provide chassis that are centrally managed and shared by members. Other pools include neutral pools in which a leasing company or other third party rents chassis to users by the day; terminal-operated pools, which can be co-op or neutral pools; and pools operated by truckers or logistics companies.
The various pools, along with traditional direct supply by ocean carriers, comprise “five different models, and they all have different flavors,” Rubin said.
Co-op pools are the primary chassis suppliers in all U.S. regions except the Northeast, where neutral pools dominate. However, all kinds of pools are present in each region. Rubin said the patchwork model is no surprise, considering the industry’s “multiple and often unaligned interests.”
Shippers and consignees are focused more on the container than the chassis, but worry that changes to chassis supply models will affect costs and service. Ocean carriers have no plans to invest in new chassis and see pools as a step toward eventually shifting chassis responsibility to motor carriers.
Motor carriers want a system that maximizes their productivity and turnaround times without forcing thinly financed truckers to own, maintain and store chassis. Terminal operators want a system that reduces congestion and minimizes storage requirements.
Other parties have different perspectives. Port authorities and public planning agencies want to minimize road congestion and optimize land use. Labor unions that maintain and repair chassis in and around ports want to keep their M&R jobs.
Harold Daggett, president of the International Longshoremen’s Association, hopes to use current ILA negotiations for East and Gulf Coast ports to ensure the union retains its M&R work when ocean carriers transfer chassis to lessor-run pools. Major leasing companies continue to hire ILA labor where the union is present, but Daggett wants those relationships tied to a contract.
As the new world of chassis supply evolves, the changes will ripple throughout the supply chain. “It has the potential to change the entire logistics picture in the U.S.,” Philip V. Connors, executive vice president at Flexi-Van, said this month in a Webinar sponsored by the Intermodal Association of North America.
In contrast to most other countries, U.S. chassis often serve as a storage, as well as a transportation, function. Truckers often deliver a container and chassis to a distribution center or terminal, where the load is stored for several days. What happens if the container is covered by free time, but the chassis is rented by the day?
Many U.S. port and inland terminals rely heavily on “wheeled” operations, in which containers are stored atop chassis. If a trucker arrives at a terminal to pick up a container, the box may have to be transferred to the trucker’s chassis, delaying delivery and adding costs.
Beneficial cargo owners need to keep up with developments and discuss them with service partners, said Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation. “It is critical that BCOs start paying attention to this and not only educate themselves but talk to their transportation providers,” he said.
Will shippers’ costs rise or fall? It’s too early to tell, Rubin said. “If the system can be made more efficient, then the cost could decline overall, but there are no guarantees,” he said. “It’s a function of who’s paying those costs … Nobody has a crystal ball on what will happen to the cost, and not just the cost from the chassis perspective, but throughout the whole supply chain.”